Quantifying Second Best Effects in Grossly Distorted Markets: The Case of the Butter Market in Poland

David Tarr

Chapter 10 in Trade Policies for Development and Transition, 2017, pp 225-239 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We develop and empirically implement a model to examine a market in a centrally planned economy characterized by a complicated maze of interrelated and offsetting distortions: the butter market in Poland. Eliminating all distortions in the butter market results in substantial structural changes and benefits to Poland. However, we find one case in which removing a distortion while others distortions remain in place results in substantial welfare losses, in classic second best fashion. Moreover, piecemeal reduction of some of the distortions results in much smaller benefits due to the offsetting effects.

Keywords: International Trade Policy; Developing Countries; Transition Countries; Growth; Poverty; Environment; Multilateral; Adjustment Costs; Autos and Steel (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2017
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Journal Article: Quantifying second best effects in grossly distorted markets: The case of the butter market in Poland (1990)
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